PRECIOUS-Gold hits 10-mth low on selloff to cover equity losses

Thu Apr 4, 2013 2:24am EDT

* Gold to test support at $1,546 -technicals 
    * Coming p: U.S. Weekly jobless claims at 1230 GMT

 (Updates prices, activity in Tokyo)
    By Lewa Pardomuan
    SINGAPORE, April 4 (Reuters) - Gold dropped to a 10-month
low on Thursday as investors cashed in the precious metal to
cover steep losses in equities after disappointing U.S. economic
data.
    Gold, a traditional safe haven, also failed to capitalise on
tensions in the Korean peninsula, where North Korea has moved
what appears to be a mid-range missile to its east coast,
according to South Korea's Yonhap news agency. 
    Gold fell as far as $1,541.14 an ounce, its lowest
since May, and stood at $1,551.61 by 0557 GMT, down $5.74. It
rallied to a 1-month peak in March on worries about fiscal
stability in Europe, as politicians scrambled to clinch a
bailout for Cyprus.
    "The environment for gold is pretty bearish now. I think if
gold tests the lower trend channel, it has the potential to drop
to the $1,530 level," said Joyce Liu, an investment analyst at
Phillip Futures in Singapore.
    "As for North Korea, I think investors are seeing the
threats more like a joke. They are not reacting as if North
Korea is really going to launch a nuclear-loaded missile. Funds
are moving out of gold because there's less need for a safe
haven."
    U.S. gold for June delivery fell $2.20 an ounce to
$1,551.30, while other precious metals also dropped sharply. 
    Silver tumbled to its lowest level since July last
year, platinum dropped to its lowest since late August,
and thinly-traded palladium was at a two-week trough. 
    Tokyo gold futures declined as much as 2.1 percent
before paring some losses as the weaker prices ignited buying
from speculators in Japan. Premiums for gold bars in Tokyo edged
up to 50 cents an ounce to spot London prices from zero earlier
this week.
    "The general public is buying. But I don't think the
Japanese people have much interest in the developments in North
Korea," said a physical dealer in Tokyo.
    
    
    Stocks fell in Asia on Thursday after weak data stoked
concerns that a key American jobs report due later in the week
will signal slowing U.S. growth. 
    The 25-day inverse correlation between gold and the S&P 500
index was at negative 0.2 after strengthening to negative
0.5 on April 2 -- the strongest link since September 2011. 
    U.S. companies hired at the weakest pace in five months in
March as recent strong demand for construction jobs evaporated,
while growth in the vast services sector slowed, signs that the
economic recovery could be hitting a soft patch. 
    Markets will be on tenterhooks until Friday's release of the
broader government payrolls report for March that would give a
fairer assessment of the U.S. jobs market.
    Signs of economic improvement could prompt the U.S. Federal
Reserve to halt its bullion-friendly bond-buying programme
earlier than expected.
    Fears that central banks' money-printing to buy assets will
stoke inflation have been a key driver in boosting gold, which
rallied to an 11-month high in October last year after the Fed
announced its third round of aggressive economic stimulus
    "The gold price is, in our view, in bubble territory.
Investors have pushed the gold price sharply higher over the
past 10 years with the past five-year rally driven by fears that
aggressive central bank quantitative easing would lead to very
high inflation," Societe Generale said in a report.  
    "But inflation has so far stayed low and now we are
beginning to see the economic conditions that would justify an
end to the Fed's QE, fiscal stabilisation that has passed its
inflection point and a U.S. dollar that has begun trending
higher." 
        
  Precious metals prices 0557 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1551.61   -5.74   -0.37     -7.34
  Spot Silver        26.94    0.02   +0.07    -11.03
  Spot Platinum    1521.24  -10.26   -0.67     -0.90
  Spot Palladium    746.47   -3.53   -0.47      7.87
  COMEX GOLD JUN3  1551.30   -2.20   -0.14     -7.43        34711
  COMEX SILVER MAY3  26.89    0.09   +0.33    -11.07         5761
  Euro/Dollar       1.2828
  Dollar/Yen         94.63
 
  COMEX gold and silver contracts show the most active months
 
 
    
    

 (Editing by Himani Sarkar and Joseph Radford)
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